Establishing a Sustainable Procurement System for Biomass Fuels

Brazil

Faced with serious global warming and climate change, the world is increasingly turning to renewable energy for a solution. Notably, biomass power generation is gathering attention as the means of stably generating electricity without being hindered by weather conditions, just like hydraulic and geothermal power. With growth expected in the global demand for biomass fuels such as wooden chips and pellets, we need to overcome the enormous challenge of procuring biomass fuels over the long term on a stable basis if we are to increase biomass power generation in Japan.

Rapidly proliferating biomass power generation in and outside Japan

Biomass fuels not only can be used at power generation facilities designed exclusively for biomass combustion, but they can also be used at existing thermal power plants by mixing them with coal, thereby reducing the amount of fossil fuel used and curbing CO2 emissions. The benefits delivered by biomass are now widely acknowledged, and have prompted Europe and other parts of the world to start using this resource.

In Japan, a Feed-In-Tariff scheme was introduced in 2012 to promote renewable energy, with corporations that acquired biomass power plants eligible for tax reductions since April 2016 as part of the government’s proactive policy to increase biomass energy. The government is aiming to boost the proportion of biomass energy in total energy consumption by four fold from the fiscal 2013 level to around 4% in fiscal 2030, heralding an increase in demand for biomass fuel.

Procuring biomass fuel from around the world while ensuring legality and traceability

Regarding biomass power generation as a crucial player in the increase of renewable energy in Japan, Sumitomo Corporation has been importing and distributing biomass fuels since 2008 by building on its long-standing experience in the wood resources business. For over 40 years, the Company has been consistently importing wooden chips as raw-materials for papermaking and supplying them to paper manufacturers in Japan. During the course of this business, Sumitomo Corporation has placed special focus on creating a framework that allows sustainable wood procurement through measures such as investing in tree planting in Russia, Chile and New Zealand. By leveraging its accumulated business expertise and relationship of trust forged with suppliers, the Company is currently working hard to procure biomass fuels including wooden chips and pellets under its basic policy of ensuring legality, traceability, and long-term and stable procurement.

Policy for wooden chips/pellets procurement

Participating in the management of a biomass fuel producer in Brazil

Projecting rising global demand for biomass fuels, Sumitomo Corporation is planning to invest in biomass fuel production for the purpose of securing biomass fuels over a longer term on a more stable basis. As its first step, the Company signed a contract in February 2016 to acquire a 20 percent stake in Cosan Biomassa S.A., a subsidiary of the world’s largest sugar and ethanol manufacturer, Cosan S.A. Industria e Comercio, based in Brazil, and to participate to its management. Cosan Biomassa produces and distributes biomass pellets made from sugarcane residue such as bagasse from sugar mills and straw left-over in sugarcane fields, which can be stably obtained in large quantities via the Cosan Group. Annual production capacity is aimed to increase from the current 175,000 tons to 2 million in 2025, and further to 8 million thereafter to respond to the expansion of the biomass fuels market.

Sumitomo Corporation is determined to continue focusing on long-term and stable procurement of biomass fuels in an effort to contribute to the increase of renewable energy and preservation of the global environment.

Biomass pellets made from sugarcane residue

PROJECT VOICE

Taking on the challenge of developing new biomass fuels from a global perspective

The biomass fuel business is still a frontier for both Sumitomo Corporation and Japan’s energy-related industries. Being in its early stages, the business allows us to contribute to increasing biomass power generation through our business operations, which is extremely appealing for us. I hope to take proactive steps in developing and commercializing biomass fuels by harnessing the Sumitomo Corporation Group’s networks toward the goal of developing biomass resources based on unused resources such as sugarcane residue from Brazil as well as wood resources.